SUMMARY CORPORATE AND SOCIAL RESPONSIBILITY REVIEW

IT IS EXPECTED THAT EVERY COMPANY SHOULD OBSERVE HIGH STANDARDS OF CORPORATE SOCIAL RESPONSIBILITY AND SMITHS IS NO EXCEPTION.

Value-added human capital
While the introduction of lean processes and the sharing of best practices are making significant contributions to growing the businesses within Smiths, maintaining our momentum demands the retention of high-calibre people as well as an inflow and development of talented employees. We continue to face this challenge in our highly competitive global business by striving to be the 'employer of choice'.

Smiths has 33,000 employees worldwide in 120 major facilities, with 75% based in the UK and North America. We are successfully bringing consistency to communicating with and rewarding our workforces and in putting environment, health and safety (EHS) policies into practice.

Career management
Following the post-merger restructuring of the group, we are developing a 360° appraisal for management-level staff, inviting feedback on individuals from reporting staff and senior colleagues. This will help us to identify skills and plan management succession and career development.

Across the group, we have programmes to enable talented employees to achieve their full potential in Smiths. Mentoring, for example, not only helps younger people to benefit from the experience of more mature managers, but is also valuable throughout an individual's development.

To help our businesses recruit young talent, we have increased graduate intake programmes and introduced a website (www.whatsnext4u.com) to communicate the prospects in Smiths for challenging careers. All job vacancies worldwide are advertised internally on the web, which we plan to extend externally.

Ethics in action
Underlining our commitment to doing business with honesty, integrity, transparency and fairness, we are formulating new human rights and ethics policies and will support them with global statements setting out our principles on managing and developing people. The aim is to make clear that this is a decent company that demands high ethical standards from employees and suppliers. Much is already common practice within Smiths – including protection for 'whistleblowers'; action against harassment and age discrimination; the introduction of equal pay reviews; and, where practical, flexible working.

Having successfully piloted an Employee Assistance Programme, we are now widening its scope and linking it with occupational health programmes. In another initiative, we are working with the RAC on improving safety and reducing stress in business driving. These are not only personal concerns, but also business issues with long-term cost implications which must be managed in line with company policies.

Corporate reporting
In 2003 we will publish the group's first full environmental performance report, including a report on corporate social responsibility. While we support good community relations practices at the corporate level, many individual businesses are major employers with deep roots in their communities and it is their employees who nurture local relationships by taking an active role.

At many sites, staff liaise with local schools to help school leavers prepare for work. Smiths is also a strong supporter of the Year in Industry scheme that gives one-year placements to pre-university students.

Employee communications
With a new constitution to reflect our new group structure, the Smiths European Forum met this year in Amsterdam, where the Chief Executive outlined the company's results and growth plans. Another key topic was the 'lean' approach through which we are gaining positive business benefits by improving processes and procedures. For example, the Smiths Purchasing Council is consolidating areas of common spend into global deals to reduce costs in areas like travel, communications and energy.

Environment, health and safety (EHS)
Smiths regards good EHS practices as integral to business performance. The Chief Executive continues to take overall responsibility through the Director, Human Resources. Corporate management of EHS has largely converged because of the increasing overlap in goals and management systems and the need for an integrated approach.

Management systems and auditing
Our target is to have major Smiths' manufacturing businesses certified to ISO 14001 by the end of 2003. All 120 of these sites have begun the process and 49 sites (40%) are now certified, up from 36 last year.

We are implementing our internal health and safety (H&S) audit system worldwide. It is complete in the UK, and expected to be complete in the US by the year-end.

Communicating best practice
Tremendous advances in communicating EHS policies over the past 12 months stem from our Trilogy website – a tool for sharing EHS best practice and reporting performance across the group. We also continue to share best practice through EHS conferences and held six this year. Further, 100 people attended ISO 14001 implementation courses that focused on results rather than infrastructure and systems.

Measurement and targets
By combining the best systems from the merged businesses, we upgraded the environmental metrics reporting system that holds data on our use of resources and reduction targets for greenhouse gas emissions, water and waste to landfill. We expect to sign up to MACC2 (Make A Corporate Commitment), later in 2002. This is a UK government-supported initiative to help organisations improve their resource efficiency and environmental performance. We shall specify our baseline performance in these areas and report annually on progress against five-year reduction targets.

In continuing our demonstration project on waste minimisation, five companies working together have identified 53 waste-saving opportunities, with total savings estimated at £340,000. EHS initiatives are also integral to our lean enterprise programmes – moving in one year from a debit of £200,000 (through investment) to an estimated cost saving of £2.8m from actions that reduce our use of raw materials, energy and water.

Reporting on H&S is enhanced this year with a new performance index, based on three separate parameters (audit score, accident statistics and workers' compensation/employer liability payments made), instead of audit scores alone. We have also introduced an internal audit/management software tool to help line managers meet their H&S responsibilities. This includes accident statistics and, while no accident is acceptable, our figures continue to be exceptionally low in our sector.

Reporting to stakeholders
Smiths has published H&S reports annually since 1999 and, later this year, will publish an EHS report as a precursor to next year's full environmental and social performance report.

Adding value
Two essentials drive our global HR and EHS policies.One is maintaining our vitality by recruiting, developing and retaining excellent people. The other is maximising their value to the company by fostering personal development and the sharing of best practice. Our transition to web-based systems is central to this and is delivering commercial value in many areas. The strength of Smiths is underpinned by the quality of our people. The global management systems we are putting in place are the foundation for reinforcing this strength for the long term.